Fuelling the Future

With North Sea production falling, what are our options for the future power generation mix?

In 2015 UK electricity came from four main sources; gas, renewables, coal and nuclear. By the end of 2016 much coal generation had been displaced by gas, coal falling from over 22% to near 9%. There are two main drivers, the low cost of gas, its high efficiency and it is relatively clean – emitting half the greenhouse gases of coal. Combined-cycle power plants use both a gas and a steam turbine together to produce up to 50 percent more electricity than a traditional simple-cycle plant. And from cold a CCGT plant can be run up in about an hour. Gas is a really great fuel. However, as North Sea reserves are depleted UK gas production is falling (by 60% since 2000) increasing dependence on imports.

The other big change is the growth of renewables, in particular wind and solar. In total renewable sources now amount to about 24% of the UK’s total generation capacity of 78Gw. The big issue with renewables is their intermittency; a windless and dark day can shut off a lot of capacity. The opposite also occurs; solar power provided 24% of UK electricity for an hour in June 2016 and renewables contributed 47% of for an hour in March 2016. Indeed, a windy clear day can result in overproduction driving wholesale electricity prices negative! In short the challenge is to balance the variability with power storage – but how?

The UK’s 15 nuclear reactors have a total capacity of some 9.5Gw but as they reach end of life 14 face decommissioning by 2030. And the cost is eye-watering, assumptions range between £97bn and £222bn. Then there’s the cost of building new ones – the huge Hinkley Point C is estimated at £20bn and could provide 7% of UK needs. But some would argue it uses unproven technology. Also it will be mainly financed by CGN of China and France’s EDF. To secure this investment, the last government agreed to pay £92.5 per megawatt hour, more than twice the cost of wholesale electricity. So can we really afford new nuclear?

So where should the UK should be investing? How should we be fuelling the future? My top two picks are power storage (very large batteries) so that we can add and use more renewable capacity and secondly small modular nuclear reactors – these are generally about 300Mw capacity (under a tenth of Hinkley Point C) and could be built in the UK. In 2015 government promised £250m over five years for a R&D programme, and after two years we are still waiting for decisions.

About the author

John Westwood

John Westwood has spent 40 years in the energy sector, initially in offshore oil & gas. A serial entrepreneur, he has formed, grown and sold three successful energy industry companies, most recently Douglas-Westwood, a highly regarded business advisory and research firm with clients in over 70 countries.